Editors Note: This is part two of this two-part series. Read Part I here.

Yesterday, this two-part series opened by underscoring how state and local governments, starving for revenues as the lengthy economic recession continues to wear down their budgets, have been shifting their fiscal burdens onto nonprofits and foundations in three ways: (1) withholding payments they owe nonprofits for contracted services; (2) taking money from nonprofit programs by imposing new fees and taxes; and (3) eliminating essential programs by slashing funds yet not eliminating the underlying human needs, thus expecting others to fill the voids they create.

Today, in part two, Tim Delaney, president and CEO of the National Council of Nonprofits, explains that government policymakers are taking these actions not because they are mean-spirited, but because of a basic lack of understanding about nonprofits and how much government relies on nonprofits. In turn, their lack of knowledge occurs in part because a variety of barriers have shunted nonprofits away from public policy, thereby squashing the voices of the American people.

Delaney ends the series with a call to action and invites your ideas about what actions should be taken.

Again this is a conversation. We invite your contributions – the sector needs your participation!


Due in large part to governmental policies and unmet community needs, the nonprofit sector has exploded in size over the last 70 years, from just 12,500 charitable nonprofits in 1940 to more than a million charities registered with the IRS in 2010. Yet policymakers, the general public, and nonprofits themselves have not fully appreciated the size of the sector, the role it plays as an economic engine through employment and other means, and the extent to which both the for-profit and government sectors rely on nonprofits.

To make informed decisions, policymakers – elected and appointed officials, and their staff members in all three branches of government – need a basic grounding in fundamental facts about nonprofits. Policymakers need to appreciate basic facts such as the following:

  • Nonprofits employ 13.5 million people – more than the 12.3 million employed by manufacturers in the United States, and more than the 11.6 million employed by the construction, finance, and insurance industries combined.
  • Nonprofits purchase billions in goods and services annually, spurring economic growth by creating and sustaining jobs in other industries.
  • Nonprofits provide invaluable services directly for government agencies, because policymakers have found that nonprofits, being mission-oriented, are often more efficient and effective. In the human service subsector alone, government agencies have entered about 200,000 formal agreements (contracts and grants) with about 33,000 nonprofit organizations to deliver basic services for government.
  • Nonprofits enable greater productivity in the business sector by, for example, providing child care services, allowing single parents to work; providing homes for the aging, reducing job absenteeism by family members who otherwise would be providing care; sparking creativity and innovation through arts and culture; and giving individuals valuable experience and job training through targeted training programs and volunteer work.
  • Nonprofits relieve the burden taxpayers would bear if government had to pay for all of the services nonprofits already deliver in their communities, such as this sampling of activities the federal government recognizes as deserving of tax?exempt status under Section 501(c)(3): “Relief of the poor, the distressed, or the underprivileged,” “prevention of cruelty to children and animals,” “advancement of education or science,” and “combating community deterioration and juvenile delinquency.”
  • Nonprofits live on the edge of survival, particularly now during this deep recession when demands for services have been skyrocketing as resources have been plummeting. Indeed, nationwide research by the Urban Institute reveals that 42 percent of human service nonprofits operated with a deficit in 2009, forcing nonprofits to eliminate jobs, freeze or reduce salaries and benefits, and reduce or cut needed services.

Given the important role that nonprofits play directly and indirectly in the nation’s economy and the vital role nonprofits play in delivering services for everyone, it is both astonishing and frightening that policymakers have such a lack of understanding about nonprofits. Consider these gaping holes of knowledge at just the federal level:

  • Agencies: Currently the federal government measures virtually every aspect of commerce, from the production numbers of agricultural efforts to emerging market trends. Yet it fails to do something as basic as consistently counting how many paid employees work for charitable nonprofit organizations, with different federal agencies posting totals that vary by millions.
  • Congress: The House version of the health care reform bill left nonprofit employers out, and when challenged, a senior staffer reportedly told members of Congress, “Nonprofits don’t need health insurance because the workers are all volunteers.” (Fortunately, this oversight was rectified in the Senate, so nonprofits are treated as small employers.)
  • Supreme Court: The sweeping language in the Citizens United majority opinion about nonprofits being able to engage in partisan political campaigns suggests the major